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When teaching the unit that discussed exponential functions in my advanced mathematics classes, I would always go over the idea of compound interest as well as the the dangers of interest when dealing with credit cards and minimum payments. I would also show students how the formula was derived that is used to calculate mortgage payments. My favorite activity was to have students view the local MLS listings and find a house that they might one day want to purchase. I would have them use the formula to determine their payments for a 30 year loan and then determine how much they would pay back to the bank over the history of the loan. Students were usually shocked to discover that they would end up paying more in interest to the bank than they did for their house. I would also have them calculate payments for a 15 year loan. Students would then see the vast difference in money they would lose to the bank when taking a 30 year as opposed to a 15 year loan.
By the end of the lesson, most students could see that by minimizing your monthly payment (whether it was a mortgage or credit card payment) this allowed the lender to maximize their profit.
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